2018 Annual & Corporate
Responsibility Report

Performance Review

Growing in Core Protection and Wealth Management

Despite market volatility, geopolitical uncertainty, and regulatory changes creating pressures, 2018 was another successful year for MassMutual. Continued growth in core protection product and wealth management sales, a highly diversified investment strategy, and a productive distribution network helped MassMutual maintain its financial strength for the benefit of policyowners and customers.

Industry-leading and historically high sales in core businesses resulted in 24 percent top-line revenue growth, a reflection of the company’s attractive portfolio of products and services. Highlights included:

  • Industry-leading weighted1 whole life insurance sales of $613 million
  • Record sales from our annuity business, topping $5 billion in 2018, nearly doubling over prior year
  • $24 billion in sales through MML Investors Services, MassMutual’s broker-dealer and registered investment adviser offering investment and wealth management solutions

From a bottom-line perspective, our primary earnings measure as a mutual company – net gain from operations before policyowners’ dividends and taxes – was $1.9 billion, consistent with the year before, driven by continued growth in all insurance business lines, in addition to favorable investment income.

Statutory surplus and total adjusted capital – the two key measures of a company’s overall financial strength – remained very strong. Surplus ended 2018 at $15.6 billion, while total adjusted capital grew to a record high of $19.9 billion. Together they position MassMutual with enhanced financial strength, flexibility, and resources for the future.

This enduring strength and stability contributed to the approval of an estimated payout of $1.7 billion in policyowner dividends2 for 2019 – the highest in company history – upholding our commitment to operate for the benefit of eligible participating policyowners. In addition, a total of $5.3 billion in insurance and annuity benefits were paid in 2018, as we delivered on our purpose to help people secure their future and protect the ones they love.

Forward-Looking Risk Management

MassMutual’s strong risk management process provides a disciplined and forward-looking enterprisewide approach, ensuring risk views are included in key strategic and operational decisions. We take a broad and multifaceted approach to identifying risk by analyzing trends in the business environment, evaluating key risk metrics, and assessing the capabilities and risks of key competitors. This allows us to identify possible risk events, prioritize them, and proactively prepare and manage for their possible occurrence – all to help protect the financial interests of our policyowners.

U.S. Insurance Sales
(In Millions)
 

chart1

MassMutual insurance sales included record-breaking contributions from annuities, as well as continued growth in other protection products. Our product offering reflects a focus on prudent risk management and creating long-term value and solutions for our policyowners.

U.S. Insurance sales include individual life insurance, disability income insurance, long-term care insurance, and annuities.

Annuity Sales
(In Millions)
 

chart2

MassMutual annuity sales continue to grow, nearly doubling in 2018, reflecting our competitive offering in the fixed and income annuity markets.

Annuity sales include individual fixed, income, and variable annuities.

U.S. Whole Life Sales
(In Millions)
 

chart3

MassMutual is an industry leader in whole life sales, with sales exceeding $1 billion for the third consecutive year. The whole life product suite is designed with flexibility to meet market needs and create long-term value for our participating policyowners.

These consolidated results of Massachusetts Mutual Life Insurance Company also include its U.S.-domiciled, wholly owned subsidiaries: MML Bay State Life Insurance Company and C.M. Life Insurance Company. Prior-year results have been restated to include additional products.

Workplace & Institutional Sales
(In Billions)
 

chart4

Workplace and Institutional businesses continue to generate strong sales volumes, with solid results across a broad product line averaging nearly $20 billion in combined sales in recent years.MassMutual maintains a mean-ingful presence in the pension risk transfer business, with sales averaging $2 billion annually.

Workplace sales include defined contribution plans in addition to disability and life insurance products sold at the workplace. Institutional sales include defined benefit plans, bank-owned life insurance, investment-only and pension risk transfer solutions, and funding agreements.

Summary of Financial Position (Consolidated statutory basis, in Millions)

As of December 31: 2018 2017
Short-term investments and cash $4,733 $3,939
Bonds 101,504 94,870
Other invested assets 70,125 70,366
Total invested assets $176,362 $169,175
Other assets 8,048 7,095
Separate account assets 70,431 75,505
Total assets $254,841 $251,775
Policyowners’ reserves 141,073 133,547
Policyowners’ dividends 1,713 1,601
Other liabilities 22,601 22,109
Asset valuation reserve 3,413 3,308
Separate account liabilities 70,431 75,505
Total liabilities $239,231 $236,070
Surplus $15,610 $15,705
Total liabilities and surplus 254,841 251,775
Steady Growth:
Total life company assets continue to grow
steadily, a result of strong sales from
MassMutual’s attractive product portfolio
Strong Surplus:
Surplus remained strong at over $15 billion,
while total adjusted capital increased
14 percent to nearly $20 billion

Consolidated Statutory Results3

Dividends
to Policyowners4
(In Millions)

chart5

Our 2018 dividends to policyowners exceeded $1.5 billion for the fifth year in a row, affirming MassMutual’s dedication to paying one of the highest dividends in the industry while maintaining financial strength.

Total Adjusted
Capital
(In Billions)

chart6

Total adjusted capital grew 14 percent to a record $19.9 billion, reflecting strong operating results and prudent capital management. This level of capital reinforces our strong financial foundation, providing flexibility and the ability to manage for optimal long-term results.

Life Company
Assets
(In Billions)

chart7

Life company assets reached an all-time high of $255 billion. Consistent growth in recent years indicates our policyowners and customers recognize the value of doing business with a mutual company, and helps ensure strength, stability, and security in the future.

Summary of Operations (Consolidated statutory basis, in Millions)

As of December 31: 2018 2017
Premium income 23,262 17,762
Net investment income 8,087 6,866
Fees and other income 1,135 1,485
Total revenue $32,484 $26,113
Policyowners' benefits 23,695 20,646
Increase in policyowners' reserves 3,056 (337)
Commissions and other expenses 3,869 3,957
Total benefits and expenses $30,620 $24,266
Net gain from operations before dividends and taxes 1,864 1,847
Dividends to policyowners 1,695 1,569
Net gain from operations before taxes $169 $278
Federal income tax (benefit) expense (159) (290)
Net gain from operations $328 $568
Net realized capital gains (1,044) (431)
Net income $(716) $137
Net investment income increased over
$1.2 billion, or 18%
over prior year, reflecting MassMutual’s
well-diversified investment strategy
Revenue exceeded
$32 billion,
a record high, reflecting MassMutual’s
offering of holistic financial solutions for
both individuals and institutions
Dividends to policyowners topped
$1.5 billion
for fifth consecutive year, evidence
of MassMutual’s commitment to its
eligible participating policyowners

Enterprise Measures

Assets Under
Management5
(In Billions)

chart8

The financial assets managed by MassMutual and its subsidiaries ended 2018 at $702 billion, reflecting the sales of its wholly owned international subsidiaries, MassMutual Japan and MassMutual Asia, as well as lower assets under management in its asset management subsidiaries due to market declines.

Life Insurance
in Force
(In Billions)

chart9

Life insurance in force represents the amount of protection the company has issued and outstanding. This measure continues to grow, up 7 percent over prior year due to strong sales and retention rates, a testament to MassMutual’s attractive product portfolio.

Premium &
Other Deposits
(In Billions)

chart10

Results in 2018 were driven by growth across our varied businesses, including domestic life insurance, our Institutional offerings, and the asset management companies.

Footnotes

1 Weighted sales are based on annualized new premium with single premium payments weighted at 10 percent.

2 Dividends are determined annually, subject to change, and not guaranteed.

3 These are consolidated statutory results of Massachusetts Mutual Life Insurance Company and its U.S.-domiciled life insurance subsidiaries: C.M. Life Insurance Company and MML Bay State Life Insurance Company.

4 Dividends are determined annually, subject to change, and not guaranteed. For more information, visit MassMutual.com/Financials.

5 Assets under management include assets and certain external investment funds managed by MassMutual subsidiaries, including Oppenheimer Funds, Inc. and Barings.